How much of your salary you should spend on rent each month
PayProp, the largest processor of rental payments in South Africa, has released its latest Rental Index, detailing the state of the residential rental market in South Africa.
The average rent in 2018 grew 4.14% to R7,610, from R7,308 in 2017. The average income meanwhile, grew to R33,037, from R32,531.
Rent-to-income ratio grew to 28.9% in 2018, from 28.0% before.
PayProp notes that it is generally accepted that rent should equal no more than 30% of a tenant’s take-home pay – that is, their salary after tax and other deductions.
“Generally speaking, financially savvy tenants, who have higher credit scores (and therefore lower risk ratings), spend less of their income on rent than high-risk and very high-risk tenants. The figure for lower-risk tenants is less than 30%, with the lowest-risk ones spending just 23% of their income on rent – 20% less than the average tenant.
“On the other end of the spectrum, the riskiest tenants spend about 33% of their income on rent,” it said.
“Most provinces saw lower rental growth and a deterioration in the average tenant’s financial situation from 2017 to 2018. Below-inflation income growth has also made it increasingly difficult to keep up with debt and other costs,” said Johette Smuts, head of data and analytics at PayProp.
Smuts said net income levels have been stagnating for some time, increasing by only 1.56% between Q4 2017 and Q4 2018. With rent and inflation increasing at higher rates, consumers are struggling to keep up.
“As for tenants’ debt-to-income ratios, tenants paid R13,756 on monthly debt repayments in Q4 2017, vs. R15,031 in Q4 2018,” said Smuts.
In Gauteng, the average rent breached R8,000 for the first time in Q4 2018.
PayProp said that 2018 yielded the lowest growth figures for the Western Cape since the launch of the Rental Index in 2012. At its lowest point of the year, growth in the Cape slowed to just 3.96% in Q4.
Even so, the average Western Cape rent surpassed the R9,000 mark during the year, still making it the most expensive province to live in with an average price differential of nearly R1,000 compared to the second most expensive province.
| Province | Average rent 2018 | Average Income | Rent-to-income ratio | Debt-to-income ratio |
|---|---|---|---|---|
| Western Cape | R9 124 | R35 815 | 29.8% | 40.2% |
| Northern Cape | R8 153 | R31 509 | 27.3% | 35.0% |
| KwaZulu-Natal | R8 129 | R33 954 | 30.4% | 45.6% |
| Gauteng | R8 064 | R31 962 | 29.6% | 46.3% |
| National Average | R7 610 | R33 037 | 28.9% | 45.5% |
| Mpumalanga | R7 248 | R32 036 | 29.7% | 46.8% |
| Limpopo | R7 173 | R28 457 | 27.1% | 43.0% |
| Free State | R5 942 | R31 796 | 26.9% | 37.6% |
| Eastern Cape | R5 703 | R27 125 | 29.5% | 43.7% |
| North West | R4 986 | R31 917 | 22.1% | 67.8% |
Read: The cheapest and most expensive South African cities to rent in
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